Original Recommendation

Blue Apron

Blue Apron (APRN)

our opinion

sell

current price

$7.39

target price

$4.00

market cap

$96M

div yield

0%

  • Blue Apron is on its last legs. It's got zero revenue growth. It's losing buyers. And it loses money on every customer that comes in. The reverse stock split was a last ditch effort to try and get investors to buy in. It won't work

trade details

Blue Apron (NYSE: APRN) is a familiar name to MightyTrades subscribers.

It’s one of our constant whipping boys. One we’ve shorted before.

It’s a stock that’s guaranteed to lose you money long term. APRN is down 78% since that post.

We traded it again February. MightyTrades readers made 29% in just 12 days.

Unfortunately, we should’ve held on. We shorted APRN at $1.49 and closed it at $1.06. However, APRN continued to drop, reaching as low as $0.50.

Now’s the time to make money on Blue Apron’s demise if you missed our trade the first time.

Blue Apron issued a 1-15 reverse split this past June. This means it consolidated shares. APRN did so just so the New York Stock Exchange (NYSE) wouldn’t delist it from the exchange. It was an act of goodwill to get in the NYSE’s good graces.

Now the shares trade at $7.39.

Investors who missed this wouldn’t know APRN was a penny stock just a month ago.

Nothing has changed though. Blue Apron’s business model is flawed. Here’s what we said in our February recommendation:

“Its revenue per customer hasn’t budged in years – roughly $240 per customer. Its average number of orders are stuck in the mud too – at about four orders per customer.

Third, it told investors it’s cutting back on marketing expenses… which is the only way to acquire new customers. Blue Apron is expensive. It’s competing with hundreds of other meal delivery kits.

The only way to entice customers to try Blue Apron is with discounts. But once you condition customers to look for discounts, they’ll never pay full price.”

The reverse split did nothing to change Blue Apron’s business.

APRN’s earnings this upcoming Q2 are going to be bad. Q1 was bad… revenues were down 28% yr/yr. Order values were flat. And marketing expenses were cut in half.

That includes all the late Christmas and New Years Resolution orders.

Morgan Stanley has a price target of $6 – 18% downside. We wouldn’t be surprised to see it go bankrupt in the next 12 months (assuming it doesn’t get bought out).

There is no reason anyone would buy APRN’s meal kits when they have unlimited meal plan options at their disposal… including grocery store delivery businesses like Shipt and Peapod.

Recommendation: Short shares of Blue Apron down to $6.80. 

**We’re going to take a half position. We want to see how they report earnings and guidance on August 6th before establishing a full position.